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Usaf Publication 907 - Main Content Table of Contents IncomeDependent Care Benefits Social Security and Railroad Retirement Benefits Disability Pensions Military and Government Disability Pensions Other Payments Itemized DeductionsMedical Expenses Impairment-Related Work Expenses Tax CreditsChild and Dependent Care Credit Credit for the Elderly or the Disabled Earned Income Credit Household Employers Business Tax Incentives How To Get Tax Help Income All income is taxable unless it is specifically excluded by law. Usaf The following discussions highlight some income items (both taxable and nontaxable) that are of particular interest to people with disabilities and those who care for people with disabilities. Usaf Dependent Care Benefits Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you worked, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. Usaf Exclusion or deduction. Usaf If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Usaf Your employer can tell you whether your benefit plan qualifies. Usaf To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Usaf You cannot use Form 1040EZ. Usaf If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Usaf Therefore, you would not get an exclusion from wages. Usaf Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. Usaf To claim the deduction, you must use Form 2441. Usaf The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Usaf Statement for employee. Usaf Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Usaf Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. Usaf Qualifying person(s). Usaf A qualifying person is: A qualifying child who is under age 13 whom you can claim as a dependent. Usaf If the child turned 13 during the year, the child is a qualifying person for the part of the year he or she was under age 13. Usaf Your disabled spouse who is not physically or mentally able to care for himself or herself. Usaf Any disabled person who was not physically or mentally able to care for himself or herself whom you can claim as a dependent (or could claim as a dependent except that the person had gross income of $3,900 or more or filed a joint return). Usaf Any disabled person who was not physically or mentally able to care for himself or herself whom you could claim as a dependent except that you (or your spouse if filing jointly) could be claimed as a dependent on another taxpayer's 2013 return. Usaf For information about excluding benefits on Form 1040, Form 1040NR, or Form 1040A, see Form 2441 and its instructions. Usaf Social Security and Railroad Retirement Benefits If you received social security or equivalent Tier 1 railroad retirement (RRTA) benefits during the year, part of the amount you received may be taxable. Usaf Are any of your benefits taxable? If the only income you received during the year was your social security or equivalent Tier 1 railroad retirement (RRTA) benefits, your benefits generally are not taxable. Usaf If you received income during the year in addition to social security or equivalent Tier 1 railroad retirement (RRTA) benefits, part of your benefits may be taxable if all of your other income, including tax-exempt interest, plus half of your benefits are more than: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. Usaf For more information, see the instructions for Form 1040, lines 20a and 20b, or Form 1040A, lines 14a and 14b. Usaf Publication 915, Social Security and Equivalent Railroad Retirement Benefits, contains more detailed information. Usaf Supplemental security income (SSI) payments. Usaf Social security benefits do not include SSI payments, which are not taxable. Usaf Do not include these payments in your income. Usaf Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Usaf You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Usaf Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Usaf You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Usaf For information on this credit, see Publication 524, Credit for the Elderly or the Disabled. Usaf Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Usaf Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Usaf For more information on pensions and annuities, see Publication 575, Pension and Annuity Income. Usaf Retirement and profit-sharing plans. Usaf If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Usaf The payments must be reported as a pension or annuity. Usaf Accrued leave payment. Usaf If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Usaf The payment is not a disability payment. Usaf Include it in your income in the tax year you receive it. Usaf See Publication 525, Taxable and Nontaxable Income, for more information. Usaf Military and Government Disability Pensions Generally, you must report disability pensions as income, but do not include certain military and government disability pensions. Usaf For information about military and government disability pensions, see Publication 525. Usaf VA disability benefits. Usaf Do not include disability benefits you receive from the Department of Veterans Affairs (VA) in your gross income. Usaf If you are a military retiree and do not receive your disability benefits from the VA, see Publication 525 for more information. Usaf Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the VA. Usaf These include: Education, training, and subsistence allowances, Disability compensation and pension payments for disabilities paid either to veterans or their families, Grants for homes designed for wheelchair living, Grants for motor vehicles for veterans who lost their sight or the use of their limbs, Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death, Interest on insurance dividends left on deposit with the VA, Benefits under a dependent-care assistance program, The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001, or Payments made under the VA's compensated work therapy program. Usaf Other Payments You may receive other payments that are related to your disability. Usaf The following payments are not taxable. Usaf Benefit payments from a public welfare fund, such as payments due to blindness. Usaf Workers' compensation for an occupational sickness or injury if paid under a workers' compensation act or similar law. Usaf Compensatory (but not punitive) damages for physical injury or physical sickness. Usaf Disability benefits under a “no-fault” car insurance policy for loss of income or earning capacity as a result of injuries. Usaf Compensation for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. Usaf Long-Term Care Insurance Long-term care insurance contracts generally are treated as accident and health insurance contracts. Usaf Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. Usaf More detailed information can be found in Publication 525. Usaf Accelerated Death Benefits You can exclude from income accelerated death benefits you receive on the life of an insured individual if certain requirements are met. Usaf Accelerated death benefits are amounts received under a life insurance contract before the death of the insured. Usaf These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Usaf This exclusion applies only if the insured was a terminally ill individual or a chronically ill individual. Usaf For more information, see Publication 525. Usaf Itemized Deductions If you file Form 1040, you generally can either claim the standard deduction or itemize your deductions. Usaf You must use Schedule A (Form 1040) to itemize your deductions. Usaf See your form instructions for information on the standard deduction and the deductions you can itemize. Usaf The following discussions highlight some itemized deductions that are of particular interest to persons with disabilities. Usaf Medical Expenses When figuring your deduction for medical expenses, you can generally include medical and dental expenses you pay for yourself, your spouse, and your dependents. Usaf Medical expenses are the cost of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part or function of the body. Usaf They include the costs of equipment, supplies, diagnostic devices, and transportation for needed medical care and payments for medical insurance. Usaf You can deduct only the amount of your medical and dental expenses that is more than 10% (7. Usaf 5% if either you or your spouse was born before January 2, 1949) of your adjusted gross income shown on Form 1040, line 38. Usaf The following list highlights some of the medical expenses you can include in figuring your medical expense deduction. Usaf For more detailed information, see Publication 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit). Usaf Artificial limbs, contact lenses, eyeglasses, and hearing aids. Usaf The part of the cost of Braille books and magazines that is more than the price of regular printed editions. Usaf Cost and repair of special telephone equipment for hearing-impaired persons. Usaf Cost and maintenance of a wheelchair or a three-wheel motor vehicle commercially known as an “autoette. Usaf ” Cost and care of a guide dog or other animal aiding a person with a physical disability. Usaf Costs for a school that furnishes special education if a principal reason for using the school is its resources for relieving a mental or physical disability. Usaf This includes the cost of teaching Braille and lip reading and the cost of remedial language training to correct a condition caused by a birth defect. Usaf Premiums for qualified long-term care insurance, up to certain amounts. Usaf Improvements to a home that do not increase its value if the main purpose is medical care. Usaf An example is constructing entrance or exit ramps. Usaf Improvements that increase a home's value, if the main purpose is medical care, may be partly included as a medical expense. Usaf See Publication 502 for more information. Usaf Impairment-Related Work Expenses If you are disabled, you can take a business deduction for expenses that are necessary for you to be able to work. Usaf If you take a business deduction for these impairment-related work expenses, they are not subject to the 10% (7. Usaf 5% if you or your spouse is age 65 or older) limit that applies to medical expenses. Usaf You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (including, but not limited to, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Usaf Impairment-related expenses defined. Usaf Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Usaf Publication 502 contains more detailed information. Usaf Tax Credits This discussion highlights three tax credits that may be of interest to people with disabilities and those who care for people with disabilities. Usaf Child and Dependent Care Credit If you pay someone to care for either your dependent under age 13 or your spouse or dependent who is not able to care for himself or herself, you may be able to get a credit of up to 35% of your expenses. Usaf To qualify, you must pay these expenses so you can work or look for work. Usaf The care must be provided for: Your qualifying child who is your dependent and who was under age 13 when the care was provided, Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Usaf You can claim the credit on Form 1040 or 1040A. Usaf You cannot claim the credit on Form 1040EZ or Form 1040NR-EZ. Usaf You figure the credit on Form 2441. Usaf For more information, see the instructions for Form 1040, line 48, or Form 1040A, line 29. Usaf Publication 503, Child and Dependent Care Expenses, contains more detailed information. Usaf Credit for the Elderly or the Disabled You may be able to claim this credit if you are a U. Usaf S. Usaf citizen or a resident alien and either of the following apply. Usaf You were 65 or older at the end of 2013, You were under 65 at the end of 2013, and retired on permanent or total disability. Usaf You can claim the credit on Form 1040 or 1040A. Usaf You figure the credit on Schedule R. Usaf For more information, see the instructions for Form 1040, line 53, or Form 1040A, line 30. Usaf Publication 524, Credit for the Elderly or the Disabled, contains more detailed information. Usaf Earned Income Credit This credit is based on the amount of your earned income. Usaf You can get the credit if your adjusted gross income for 2013 is less than: $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, or $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children. Usaf To figure the credit, use the worksheet in the instructions for Form 1040, 1040A, or 1040EZ. Usaf If you have a qualifying child, also complete Schedule EIC, Earned Income Credit, and attach it to your Form 1040 or 1040A. Usaf You cannot use Form 1040EZ if you have a qualifying child. Usaf Qualifying child. Usaf To be a qualifying child, your child must be younger than you (or your spouse if married filing jointly) and under age 19 or a full-time student under age 24 at the end of 2013, or permanently and totally disabled at any time during 2013, regardless of age. Usaf Earned income. Usaf If you are retired on disability, benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Usaf However, payments you received from a disability insurance policy that you paid the premiums for are not earned income. Usaf More information. Usaf For more information, including all the requirements to claim the earned income credit, see the instructions for Form 1040, line 64a; Form 1040A, line 38a; or Form 1040EZ, line 8a. Usaf Publication 596, Earned Income Credit (EIC), contains more detailed information. Usaf Household Employers If you pay someone to work in your home, such as a babysitter or housekeeper, you may be a household employer who has to pay employment taxes. Usaf A person you hire through an agency is not your employee if the agency controls what work is done and how it is done. Usaf This control could include setting the fee, requiring regular reports, and providing rules of conduct and appearance. Usaf In this case you do not have to pay employment taxes on the amount you pay. Usaf But if you control what work is done and how it is done, the worker is your employee. Usaf If you possess the right to discharge a worker, that worker is generally considered to be your employee. Usaf If a worker is your employee, it does not matter that you hired the worker through an agency or from a list provided by an agency. Usaf To find out if you have to pay employment taxes, see Publication 926, Household Employer's Tax Guide For Wages Paid in 2013. Usaf Business Tax Incentives If you own or operate a business, or you are looking for work, you should be aware of the following tax incentives for businesses to help persons with disabilities. Usaf Deduction for costs of removing barriers to the disabled and the elderly—This is a deduction a business can take for making a facility or public transportation vehicle more accessible to and usable by persons who are disabled or elderly. Usaf For more information, see chapter 7 of Publication 535, Business Expenses. Usaf Disabled access credit—This is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons with disabilities. Usaf The expenses must be to enable the eligible small business to comply with the Americans With Disabilities Act of 1990. Usaf See Form 8826, Disabled Access Credit, for more information. Usaf Work opportunity credit—This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. Usaf One targeted group consists of vocational rehabilitation referrals. Usaf These are individuals who have a physical or mental disability that results in a substantial handicap to employment. Usaf See Form 5884, Work Opportunity Credit. Usaf How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. Usaf Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Usaf Free help with your tax return. Usaf Free help in preparing your return is available nationwide from IRS-certified volunteers. Usaf The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Usaf The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Usaf Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Usaf Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Usaf To find the nearest VITA or TCE site, visit IRS. Usaf gov or call 1-800-906-9887. Usaf As part of the TCE program, AARP offers the Tax-Aide counseling program. Usaf To find the nearest AARP Tax-Aide site, visit AARP's website at www. Usaf aarp. Usaf org/money/taxaide or call 1-888-227-7669. Usaf For more information on these programs, go to IRS. Usaf gov and enter “VITA” in the search box. Usaf Internet. Usaf IRS. Usaf gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Usaf Apply for an Employer Identification Number (EIN). Usaf Go to IRS. Usaf gov and enter Apply for an EIN in the search box. Usaf Request an Electronic Filing PIN by going to IRS. Usaf gov and entering Electronic Filing PIN in the search box. Usaf Check the status of your 2013 refund with Where's My Refund? Go to IRS. Usaf gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. Usaf If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Usaf Check the status of your amended return. Usaf Go to IRS. Usaf gov and enter Where's My Amended Return in the search box. Usaf Download forms, instructions, and publications, including some accessible versions. Usaf Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Usaf gov or IRS2Go. Usaf Tax return and tax account transcripts are generally available for the current year and past three years. Usaf Figure your income tax withholding with the IRS Withholding Calculator on IRS. Usaf gov. Usaf Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Usaf Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Usaf gov. Usaf Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Usaf gov or IRS2Go. Usaf Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Usaf An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Usaf Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Usaf If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Usaf Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Usaf Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Usaf gov. Usaf Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Usaf The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Usaf Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Usaf AARP offers the Tax-Aide counseling program as part of the TCE program. Usaf Visit AARP's website to find the nearest Tax-Aide location. Usaf Research your tax questions. Usaf Search publications and instructions by topic or keyword. Usaf Read the Internal Revenue Code, regulations, or other official guidance. Usaf Read Internal Revenue Bulletins. Usaf Sign up to receive local and national tax news by email. Usaf Phone. Usaf You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Usaf Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Usaf Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Usaf Call to locate the nearest volunteer help site, 1-800-906-9887. Usaf Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Usaf The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Usaf Most VITA and TCE sites offer free electronic filing. Usaf Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Usaf Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Usaf Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. Usaf The automated Where's My Refund? information is available 24 hours a day, 7 days a week. Usaf If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Usaf Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Usaf Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Usaf Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Usaf Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Usaf Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Usaf You should receive your order within 10 business days. Usaf Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Usaf Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. Usaf Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Usaf Call to ask tax questions, 1-800-829-1040. Usaf Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Usaf The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Usaf These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Usaf gsa. Usaf gov/fedrelay. Usaf Walk-in. Usaf You can find a selection of forms, publications and services — in-person, face-to-face. Usaf Products. Usaf You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Usaf Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Usaf Services. Usaf You can walk in to your local TAC most business days for personal, face-to-face tax help. Usaf An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Usaf If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Usaf No appointment is necessary—just walk in. Usaf Before visiting, check www. Usaf irs. Usaf gov/localcontacts for hours of operation and services provided. Usaf Mail. Usaf You can send your order for forms, instructions, and publications to the address below. Usaf You should receive a response within 10 business days after your request is received. Usaf Internal Revenue Service 1201 N. Usaf Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Usaf The Taxpayer Advocate Service (TAS) is your voice at the IRS. Usaf Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Usaf What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Usaf We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Usaf You face (or your business is facing) an immediate threat of adverse action. Usaf You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Usaf If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Usaf Here's why we can help: TAS is an independent organization within the IRS. Usaf Our advocates know how to work with the IRS. Usaf Our services are free and tailored to meet your needs. Usaf We have offices in every state, the District of Columbia, and Puerto Rico. Usaf How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Usaf irs. Usaf gov/advocate, or call us toll-free at 1-877-777-4778. Usaf How else does TAS help taxpayers? TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Usaf If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Usaf irs. Usaf gov/sams. Usaf Low Income Taxpayer Clinics. Usaf Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Usaf Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Usaf Visit www. Usaf TaxpayerAdvocate. Usaf irs. Usaf gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Usaf Prev Up Next Home More Online Publications
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Usaf 35. Usaf Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. Usaf They are: The American opportunity credit, and The lifetime learning credit. Usaf The chapter will present an overview of these education credits. Usaf To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. Usaf Can you claim more than one education credit this year? For each student, you can choose for any year only one of the credits. Usaf For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. Usaf If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. Usaf If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. Usaf This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Usaf Table 35-1. Usaf Comparison of Education Credits Caution. Usaf You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Usaf American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly; $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. Usaf There are several differences between these two credits. Usaf These differences are summarized in Table 35-1, later. Usaf Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. Usaf The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. Usaf For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). Usaf Academic period. Usaf An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Usaf In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Usaf Eligible educational institution. Usaf An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Usaf S. Usaf Department of Education. Usaf It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Usaf The educational institution should be able to tell you if it is an eligible educational institution. Usaf Certain educational institutions located outside the United States also participate in the U. Usaf S. Usaf Department of Education's Federal Student Aid (FSA) programs. Usaf Who can claim a dependent's expenses. Usaf If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Usaf Therefore, only that person can claim an education credit for the student. Usaf If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Usaf Expenses paid by a third party. Usaf Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Usaf However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Usaf Therefore, you are treated as having paid expenses that were paid by the third party. Usaf For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Usaf 970, chapter 2 or 3. Usaf Who cannot claim a credit. Usaf You cannot take an education credit if any of the following apply. Usaf You are claimed as a dependent on another person's tax return, such as your parent's return. Usaf Your filing status is married filing separately. Usaf You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. Usaf Your MAGI is one of the following. Usaf American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). Usaf Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . Usaf Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Usaf However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. Usaf For details, see Pub. Usaf 970. Usaf Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Usaf The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. Usaf However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. Usaf You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Usaf See Pub. Usaf 970 for information on other education benefits. Usaf Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Usaf It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Usaf For course-related books, supplies, and equipment, only certain expenses qualify. Usaf American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Usaf Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. Usaf Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. Usaf However, fees for personal expenses (described below) are never qualified education expenses. Usaf Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Usaf This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Usaf Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. Usaf You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). Usaf However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). Usaf In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. Usaf Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Usaf Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Usaf If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. Usaf Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Usaf See Adjustments to Qualified Education Expenses, later. Usaf Prepaid Expenses. Usaf Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. Usaf See Academic period , earlier. Usaf For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Usaf You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Usaf Paid with borrowed funds. Usaf You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Usaf Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. Usaf Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Usaf Student withdraws from class(es). Usaf You can claim an education credit for qualified education expenses not refunded when a student withdraws. Usaf No Double Benefit Allowed You cannot do any of the following. Usaf Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. Usaf Claim more than one education credit based on the same qualified education expenses. Usaf Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Usaf Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. Usaf See Adjustments to Qualified Education Expenses, next. Usaf Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. Usaf The result is the amount of adjusted qualified education expenses for each student. Usaf Tax-free educational assistance. Usaf For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Usaf See Academic period , earlier. Usaf Tax-free educational assistance includes: Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Usaf 970), The tax-free part of Pell grants (see chapter 1 of Pub. Usaf 970), The tax-free part of employer-provided educational assistance (see Pub. Usaf 970), Veterans' educational assistance (see chapter 1 of Pub. Usaf 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Usaf Generally, any scholarship or fellowship is treated as tax-free educational assistance. Usaf However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Usaf 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Usaf 970, chapter 1. Usaf You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year received. Usaf For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Usaf 970. Usaf Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Usaf This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Usaf If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Usaf If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Usaf Refunds. Usaf A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. Usaf Some tax-free educational assistance received after 2013 may be treated as a refund. Usaf See Tax-free educational assistance, earlier. Usaf Refunds received in 2013. Usaf For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Usaf Refunds received after 2013 but before your income tax return is filed. Usaf If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Usaf Refunds received after 2013 and after your income tax return is filed. Usaf If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. Usaf See Credit recapture, next. Usaf Credit recapture. Usaf If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Usaf You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Usaf You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Usaf Include that amount as an additional tax for the year the refund or tax-free assistance was received. Usaf Example. Usaf You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Usaf You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . Usaf 20). Usaf You claimed no other tax credits. Usaf After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Usaf You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Usaf The refigured credit is $1,320 and your tax liability increased by $280. Usaf You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. Usaf See the instructions for your 2014 income tax return to determine where to include this tax. Usaf If you also pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Usaf Amounts that do not reduce qualified education expenses. Usaf Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Usaf Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Usaf The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Chapter 1 of Pub. Usaf 970. Usaf The use of the money is not restricted. Usaf For examples, see chapter 2 in Pub. Usaf 970. Usaf Figure 35-A. Usaf Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Usaf Please click the link to view the image. Usaf Figure 35-A. Usaf Can You Claim an Education Credit for 2013? Prev Up Next Home More Online Publications